GME

What does GME stand for?

Investing is not a game. But sometimes games can be involved.

GME is the ticker code for GameStop, an American electronics retail company founded in 1996 and currently headquartered in Grapevine, Texas. GameStop is the world’s largest video game retailer, with stores throughout the United States, Europe, Canada, Australia and online.

Via its GameStop, EB Games, and Micromania-Zing brands, GameStop sells both new and pre-owned consoles and hard copy video games, gaming accessories, memory cards, virtual reality products, digital games, downloadable game content, network points cards, gaming subscription cards and much more.

GameStop also sells gaming related collectibles via its Zing Pop Culture and ThinkGeek brands as well as video game related print publications via Game Informer.

What happened with GME and the short squeeze?

In January 2021, the GME stock price rose from US$17.25 to almost US$350 during trade, an astronomical jump of over 1700% in just 3 weeks. Towards the end of the month, GME’s price reached a pre-market high of $500.

The jump in value was caused by a short squeeze triggered primarily by Reddit traders from the Subreddit WallStreetBets, a forum in which traders speculate on market activity and stocks.

Traders on WallStreetBets had discovered that large hedge funds including Point72 Asset Management, Citron Capital, Candlestick Capital Management and Melvin Capital held substantial short positions in GameStop. In turn, traders from WallStreetBets banded together to big the GME share price upwards deliberately to cause a short squeeze.

As a result, hedge funds and anyone else holding short positions in GME lost approximately US$12.79b over the course of a few weeks. By mid February, GME’s price lost almost 90% of its value as traders exited their positions in a hurry.

What is a short squeeze?

When traders own short positions in a stock, they’re expecting the value of that stock to go downwards. But when the same stock rises for whatever reason, traders who hold those short positions begin incurring losses.

Short squeezes occur when traders holding short positions begin buying long positions in order to cover the losses on their shorts. This can trigger a buying frenzy which can drive the price of a stock incredibly high in a short space of time.

Is GME Crypto related to GME stock?

Yes and no.

GME stock is bought and sold on the New York Stock Exchange like any other common stock, via traditional trading platforms.

Meanwhile, GME Crypto can only be bought and sold on cryptocurrency exchanges built on top of blockchain networks. GME Crypto was created by crypto exchanges to allow traders without access to regular trading platforms to get exposure to GME stock.

GME Crypto can be traded on exchanges such as Hotbit and Uniswap, and its price roughly follows the price of GME stock.

Should I buy GME?

Between 2018 and 2021, GME’s revenue declined by approximately 18%. Its operating income dropped from $US526m to minus $US254m.

GameStop is currently unprofitable and does not pay a dividend.

Many investors believe GME stock to be a volatile investment.